ORDER ON PARTIES' CROSS-MOTIONS FOR SUMMARY JUDGMENT.
ATTORNEY FOR PETITIONER: RONALD M. SOSKIN, BOSE McKINNEY & EVANS LLP, Indianapolis, IN.
ATTORNEYS FOR RESPONDENT: GREGORY F. ZOELLER, ATTORNEY GENERAL OF INDIANA, JOHN P. LOWREY, DEPUTY ATTORNEY GENERAL, Indianapolis, IN.
Thomas G. Fisher, Senior Judge.
Hoosier Roll Shop Services, LLC has challenged the Indiana Department of
State Revenue's (Department) final determination denying it an exemption from Indiana's sales and use taxes for equipment it used and materials it consumed in grinding and calibrating its customers' work rolls during the 2007 and 2008 tax years (the years at issue). The matter, currently before the Court on the parties' cross-motions for summary judgment, presents one issue: whether in grinding and calibrating its customers' work rolls, Hoosier Roll produces other tangible personal property. The Court finds that it does.
Generally speaking, mills are in the business of converting slabs of raw steel, aluminum, and paper pulp into " sheets" of finished product for their customers: steel suitable for use as automobile framing or refrigerator doors; aluminum suitable for baking foil and dishes or beverage cans; and paper suitable for cigarettes, facsimile machines, or cardboard boxes. (See, e.g., Pet'r Am. Jt. Stipulation Facts (" Jt. Stip." ) ¶ ¶ 18-19; Pet'r Des'g Evid. Supp. Mot. Summ. J., Ex. 5 (hereinafter " Burke Aff." ) ¶ ¶ 6, 12, 15, 23-24.) The mills accomplish this conversion through a high-tech rolling process: they run the raw slabs and pulp along a conveyer-belt type mechanism and through huge rolling machines at speeds often exceeding three thousand feet per minute. (Jt. Stip. ¶ ¶ 18, 20.) The rolling process " is so precise that variations of more than a ten-thousandth to ten-millionth of an inch may reduce the rolled product to scrap." (Burke Aff. ¶ 14.)
A rolling machine contains two work rolls, each weighing up to 5,900 pounds. (Jt. Stip. ¶ 21.) The work rolls operate like giant rolling pins to create the proper thickness, flatness, surface texture, and luster of the sheet product as it passes between them. (See Jt. Stip. ¶ 22.) In order for the work rolls to create the proper thickness, flatness, surface texture, and luster of the sheet product, their surfaces must be ground and calibrated to certain specifications. (Jt. Stip. ¶ ¶ 23, 25, 28.) While some mills grind and calibrate their work rolls in-house, others outsource their work to roll shops like Hoosier Roll. (Burke Aff. ¶ 8.)
When mills purchase new work rolls, they are blank and must be ground and calibrated before they can even be used. (Jt. Stip. ¶ ¶ 24-25.) Once used for a specific job, the work rolls can be ground and calibrated to entirely new specifications and then used to produce an entirely different
sheet product. (See Jt. Stip. ¶ 27.) A work roll can be ground and calibrated between 66 and 200 times (depending on whether it is a " hot mill" or a " cold mill" work roll); the mean number of times that a work roll is ground and calibrated is 40 times. (See Resp't Des'g Evid. Opp'n Pet'r Mot. Summ. J. (hereinafter " Resp't Des'g Evid." ), Ex. 6, Interrogs. 13, 14.)
Hoosier Roll's Process
When Hoosier Roll is engaged by a customer to grind and calibrate work rolls, it first inspects and tests the work rolls to determine if they are salvageable. (See Resp't Des'g Evid., Ex. 3 (hereinafter " Department's LOF" ) at 6-7.) Furthermore, it must remove any coating ...